Editing Unification of Germany (section)

=== Unified Italy and Austro-Hungarian Compromise ===
{{further|Austro-Hungarian Compromise of 1867}}
The [[Peace of Prague (1866)|Peace of Prague]] offered lenient terms to Austria but its relationship with the new nation-state of Italy underwent major restructuring. Although the Austrians were far more successful in the military field against Italian troops, the monarchy lost the important province of [[Kingdom of Lombardy–Venetia|Venetia]]. The Habsburgs ceded Venetia to France, which then formally transferred control to Italy.<ref>{{Cite book |last=Schjerve |first=Rosita Rindler |title=Diglossia and Power: Language Policies and Practice in the Nineteenth Century Habsburg Empire |date=2003 |publisher=De Gruyter |isbn=978-3-1101-7654-4 |location=Berlin |pages=199–200 |ol=9017475M}}</ref>

The end of Austrian dominance of the German states shifted Austria's attention to the Balkans. The reality of defeat for Austria also caused a reevaluation of internal divisions, local autonomy, and liberalism.<ref>{{Harvnb|Sheehan|1989|pp=909–910}}; {{Harvnb|Wawro|1996|loc=Chapter 11}}.</ref> In 1867, the Austrian emperor [[Franz Joseph I of Austria|Franz Joseph]] accepted a settlement (the [[Austro-Hungarian Compromise of 1867]]) in which he gave his Hungarian holdings equal status with his Austrian domains, creating the Dual Monarchy of [[Austria-Hungary]].{{Sfn|Sheehan|1989|pp=905–910}}